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Currency volatility sees multinationals lose almost US$10bn in Q1

North American and European companies reported a combined US$9.54bn in quantified negative currency impacts in Q1 2021, up 55% from the previous quarter, according to Kyriba's Currency Impact Report for Q2021. 

European companies accounted for 38% of the impact, reporting US$3.67bn in quantified impacts. North American companies quantifying headwinds reported a total of US$5.87bn in negative currency impacts, a break in the low trend seen in the past two quarters. This is potentially due to the continued volatility of the US dollar. 

Currency impact on North American corporate earnings 

North American companies reported a US$5.87bn collective loss in Q1 2021, ending a trend upward and a 322% increase in the magnitude of aggregate headwinds. The average earnings per share (EPS) impact reported by North American companies in Q1 2021 was US$0.03, three times greater than the industry standard MBO of less than US$0.01 EPS impact and a maintenance of the level set by the previous quarter. 

The Chinese renminbi (CNY) broke a two-quarter trend of the euro being the most mentioned currency. The Great British pound (GBP) was the third most-mentioned, followed closely by the Brazilian real (BRL) and the Swiss franc (CHF). The franc is an atypical appearance in North American earnings calls, but was also present in the top 5 mentioned last quarter. The renminbi was in the top 5 most volatile currencies, as well as top 5 most volatile weighted by GDP.

Currency impact on European corporate earnings 

Continuing an upward trend, European companies reported a 23% decrease in negative currency impacts, with companies reporting US$3.67bn in FX-related losses. Of the 350 Europe-based multinationals analysed, 5% reported headwinds in Q1 2020. Of those, 88.9% quantified their negative impacts. 

The US dollar (USD) was the most mentioned currency in earnings calls for Europe, followed by the euro (EUR) and Chinese renminbi (CNY). The Great British pound (GBP) was the fourth most mentioned, followed by the Swedish krona (SEK). The Swedish krona (SEK) is an atypical appearance as the most mentioned currency, which continues the trend from the previous two quarters. The euro, renminbi, and pound were all found to be in the top 5 most volatile currencies as well. 

Overall, 95 multinationals reported losses due to currency, 77 from North America and 18 from Europe. By contrast, last quarter, 56 North American and European corporations reported global FX headwinds.

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